Ahead of the 2020 election, then-President Donald Trump warned that if Joe Biden was elected, “stocks are going to crash like you’ve never seen before.”
However, since President Biden took office on January 20, 2021, the stock market has posted strong gains. Since his inauguration, the S&P 500 has returned 55%. In 2024, the benchmark index set 47 all-time highs.
During the election campaign, Trump is again repeating the same statement that he made four years ago. In August, he told reporters that if Vice President Kamala Harris is elected, “we’re going to have a crash, and we’re going to have a crash like the crash of 1929.”
While Trump is known for using hyperbole, market efficiency remains an important issue for likely voters. To better understand how the outcome of the 2024 presidential election could affect stocks, let’s look at some sectors that could be affected by candidates’ policies.
Energy stocks could benefit no matter who wins
The S&P 500 energy sector could perform well under a Trump or Harris presidency. In the second year of Trump’s presidency, the United States became the world’s largest oil-producing country, ahead of both Saudi Arabia and Russia, and has maintained that position ever since.
The former president made his position on deregulation and expansion of fossil fuel development clear. He withdrew the US from the Paris climate accords during his first year in office and vowed to “end the Green New Deal if he regains the White House.” The oil and gas industry has donated more than $20 million to Trump this election cycle, according to OpenSecrets, a nonprofit that tracks and publishes campaign finance and lobbying data.
But despite Trump’s strong support for fossil fuels, energy has performed the worst of the 11 S&P 500 sectors in three of his four years in office. (He finished second to last the rest of the year.)
However, despite Trump’s claim in 2020 that Biden would “destroy the oil industry,” America’s fossil fuel production has surged. According to the Energy Information Agency, the United States produced more oil in 2023 than any other country in history and is also the largest producer of oil and gas.
Harris has suggested she will continue Biden-era energy policies. She said in October that while she remained committed to renewable energy initiatives, she would not seek a ban on hydraulic fracturing, a controversial high-pressure oil extraction method that accounts for nearly two-thirds of U.S. oil production.
Thanks to Biden’s policies, which Harris is likely to carry over into his administration if elected, the energy sector has thrived. It has been the S&P’s best-performing sector in two of the last three years, up 54.6% in 2021 and up 65.7% in 2022.
Big Tech donors favor Harris
Unlike the fossil fuel industry, the technology sector has made significant donations to Harris’ campaign. The electronics and hardware industries contributed more than $19 million to the 2024 vice presidential race, and internet companies contributed $14 million. Google’s parent company Alphabet donated $4.7 million alone.
Part of the enthusiasm in the tech industry is likely due to the Biden-Harris administration’s passage of the Chips and Science Act, which increased investment in American semiconductor manufacturing, benefiting companies such as Advanced Micro Devices, Broadcom, Nvidia and Qualcomm.
Initiatives like the CHIPS Act, as well as the rise of artificial intelligence, have contributed to the tech sector’s tremendous gains in the market. Last year, the technology sector topped the list of S&P 500 sectors, growing 57.8%. In the first 10 months of 2024, the tech industry’s year-to-date growth was 30.3%, just a hair shy of first place.
The S&P 500 information technology sector has also performed well under Trump’s presidency, ranking first among all 11 sectors in three of his four years in office, including a 50.3% gain in 2019.
But the former president has been sharply critical of what he sees as monopolistic practices by big tech companies, and his administration has sued Amazon, Apple, Google and Meta on allegations the companies violated antitrust laws.
This sentiment was supported by his choice of Ohio Senator J.D. Vance for vice president. In July, Reuters reported that Vance supports antitrust enforcement against big tech companies and that he has openly praised the work of Federal Trade Commission Chair Lina Khan in her pursuit of companies engaging in anticompetitive practices.
However, big tech companies will likely face legal challenges no matter who ends up in the White House, as Khan is a Biden appointee and could retain his role under a Harris administration.
Financial sector supports Trump
Campaign donation records show the securities and investment industry, which includes hedge funds, investment banks, brokerage firms and mortgage lenders, gave $203.5 million to the former president, compared with $63.2 million to Harris, according to according to OpenSecrets, which provides industry estimates. -Industry breakdown of donors.
While Trump’s Tax Cuts and Jobs Act in 2017 permanently lowered the corporate tax rate from 35% to 21%, Harris’ tax plan would raise corporate taxes from their current rate of 21% to 28%.
Similar to his plans for the oil and gas industry, Trump has promised to deregulate the financial industry. In September, Politico reported that during a speech at the Economic Club of New York, the former president promised low taxes, low regulation and low interest rates, all of which have a huge impact on financial services companies.
Whether Trump’s policies will be bullish for financial stocks during his second term remains to be seen. But looking back at Trump’s first term, the S&P 500 financial services sector has had mixed results during his four years in office. Financial performance has swung between gains and losses every two years, with an average return of 9.9%, which trails the sector’s average gain of 14.56% under the current administration.
Trump’s agenda will seek to limit the powers of financial regulators, similar to how he repealed parts of the Obama-era Dodd-Frank Wall Street Reform and Consumer Protection Act following the global financial crisis. The rollbacks, which were well received by Wall Street, allowed small and midsize banks to no longer be subject to stress tests, “leaving fewer than 15 large banks in the United States under stricter federal oversight,” according to the law. Barclay Damon firm.
The bull market is ready to continue
Regardless of who takes the White House in 2025, they will likely enjoy the continued momentum of the bull market. The Federal Reserve is expected to continue cutting interest rates, with a cut at its next meeting on November 6 all but guaranteed. All other things being equal, lower yields on interest rate-sensitive investments such as bonds and certificates of deposit may encourage investors to move their money into assets such as stocks and ETFs.
Surprisingly, election years aren’t all that bad for stocks, despite investor sentiment often suggesting otherwise. The S&P 500 performs only slightly better in non-election years than in presidential election years, with an average annual return of 11.6% for the former compared to an average annual return of 11% for the latter.
However, depending on which candidate wins on Election Day, the market could see divergence across sectors, leading to overperformance for some and underperformance for others.
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